It is hard to overstate how optimistic Bitcoin’s outlook for 2024 is. While many people may feel like they are too late (why didn’t I buy it under $100?), like they missed the opportunity, it has likely never been a better time to jump in. More specifically, the ratio of potential rewards compared to the risks behind Bitcoin has never been more attractive. Demand, supply, awareness, narrative, fundamentals; all stars seem to align to give us a memorable year 2024. In particular, here are the top 21 reasons why Bitcoin’s 2024 outlook is exceptionally bullish.
Demand
1. Multiple spot Bitcoin ETFs are expected to be approved by the SEC in the coming weeks, bringing billions of dollars in additional demand as the asset becomes investable for institutions via a traditional financial product. At the same time, ETFs are raising awareness about the asset and providing regulatory clarity as well as the backing of major financial institutions. This expectation is evidenced by the decreasing discount at which Grayscale Bitcoin Trust (GBTC) is trading versus Bitcoin, from nearly 50% discount last year to below 10% discount in December 2023. Besides, countless analysts and asset managers close to the matter have shared their expectations of an imminent spot Bitcoin ETF approval.
Supply
2. The fourth halving of Bitcoin’s supply is coming in April, and so far, the asset’s price action (+150% YTD) rhymes with the last three halving events, which yielded 101x, 30x, and 8x respectively, after the halving. Halving the supply means that the downward pressure on Bitcoin’s price will drop, because miners will only get half as many bitcoins to sell every day than they currently do (900 bitcoins per day). It also triggers the next level of scarcity, as the stock-to-flow ratio of Bitcoin will suddenly double. Specifically, April 2024 will make history, as Bitcoin will become the scarcest asset in the world (the highest stock-to-flow asset), taking over this title from gold for the first time.
3. Liquid supply is dropping even faster, as increasingly more bitcoins are moving to wallets controlled by illiquid owners. Specifically, more bitcoins are moving to private custody rather than being held and traded on exchanges. A lower liquid supply means that the multiplicator effect of purchases increases: When an entity buys $1 billion of Bitcoin, the market capitalization of Bitcoin increases by more than $1 billion, because this purchase impacts the price upwards.
Regulation
4. FASB, the entity setting accounting and financial standards for companies in the US, voted in September 2023 to adopt fair-value accounting for Bitcoin. This change means that companies can hold Bitcoin on their balance sheet at market price and therefore can recognize unrealized gains, instead of having to treat it as an intangible and follow the impairment model. This is a significant development, as it opens the possibility for companies to increase their reported earnings and equity when their Bitcoin holdings appreciate. This change makes Bitcoin holdings more attractive for companies, not only because they can show more favorable financial results when Bitcoin rises, but also because FASB’s move can be seen as a legitimization of Bitcoin as an asset class.
5. The Satoshi Action Fund, a non-profit educational organization in the US, is expecting to pass pro-Bitcoin regulations in 10 US states in 2024, in addition to the pro-Bitcoin regulatory developments of 2023. More regulatory clarity increases institutional investments, boosts consumer confidence, and spurs entrepreneurship in the Bitcoin space, further increasing the demand for and the potential of the asset.
Fundamentals
6. Adoption increases as the number of addresses with 1 full bitcoin is now at an all-time high. Similarly, addresses with over 0.1 bitcoin and addresses with over 0.01 bitcoin also show their highest level ever.
7. Bitcoin’s hashrate is now reaching a new all-time high of 500 EH/s, strengthening its status as the most secure network of all time.
8. Bitcoin’s volatility, in contrast, has been trending downward in line with the asset maturing. Low volatility for an asset is particularly important for investors looking at the ratio of return to volatility (e.g., Sharpe Ratio or Sortino Ratio). With its high return and comparatively low volatility, Bitcoin strengthens its attractiveness for investors.
9. Besides, Bitcoin’s correlation with traditional asset classes has dropped to an all-time low. Low correlation with other asset classes is making Bitcoin an extremely attractive addition to any traditional investment portfolio (e.g., hedge funds, pensions funds, family offices), because it enables asset managers to lower the volatility of their portfolio while increasing their expected returns.
10. Bitcoin’s decentralization of its mining activities is expected to increase. For instance, thought leaders like Jack Dorsey invest millions in a decentralized Bitcoin mining pool called OCEAN. While it may be a small investment so far, the move is at the very least shedding the spotlight on the issue, inviting other miners to follow suit. Further decentralizing the protocol reduces its risks and therefore makes it even more valuable.
11. Layer-2 solutions (e.g., the Lightning Network) are finally becoming scalable, enabling Bitcoin to be used as a medium of exchange: instantaneous transactions at virtually no fee. Specifically, the adoption of Lightning has increased by a factor of 10 since summer 2021. With this new function, Bitcoin as an asset in 2024 will be vastly different (and superior) from Bitcoin as an asset in previous years.
12. Bitcoin balances on exchanges are dropping because people understand the importance of self-custody. Personally, I see this development as an indication of less speculation in the market and more genuine use of an asset acting as a decentralized store of value.
13. In November 2023, we reached another new record: More than 70% of bitcoins have not moved in over 1 year. And this development happened despite Bitcoin’s price more than doubling over that period. Again, this record supports the theory that speculation in the asset is decreasing while it is replaced by long-term holding.
Narrative
14. The narrative around Bitcoin as an ESG asset is finally being recognized and starting to settle: from banking the unbanked to mitigating methane emissions, incentivizing the production of renewable energy, and stabilizing power grids. Peer-reviewed publications and traditional media increasingly cover this aspect of Bitcoin, which is likely to stir further interest from the public in the asset.
15. Traditional investment managers recently turned pro-Bitcoin. One of the biggest developments of 2023 is Larry Fink’s 180-degree turnaround on Bitcoin. From calling Bitcoin “an index of money laundering” in 2017, he now vocally supports it and deems its recent rise in price as a “flight to quality.” As CEO and Chairman of the biggest investment firm in the world, Blackrock, his opinion will hardly go unnoticed. Similarly, Jurrien Timmer, Director of Global Macro at Fidelity considers it a “hedge against monetary debasement” and “exponential gold.”
16. The difference between Bitcoin and all other cryptoassets becomes increasingly clear: one is a commodity (an asset without an issuer), while virtually all others are securities (not genuinely decentralized assets). With upcoming regulation likely to support this stance, the unique position of Bitcoin will once again be highlighted.
Awareness
17. El Salvador, where Bitcoin is legal tender, had its credit rating upgraded by S&P in November 2023, shedding light on the early success of its Bitcoin strategy. In addition, in December 2023, the value of the country’s Bitcoin investment turned positive for the first time, after two years of Bitcoin accumulation in the longest bear market experienced by the asset.
18. Besides, a vocally pro-Bitcoin libertarian economist was elected as president in Argentina in November 2023. Javier Milei’s videos are already going viral, as he denounces the vices of socialist economies and fiat currencies. For example, his interview with Tucker Carlson of mid-September 2023 is amongst the most viewed videos on the platform X, with already over 400 million impressions.
19. Multiple US presidential candidates vowed to bring up Bitcoin as a topic in the 2024 election. Specifically, prominent pro-Bitcoin candidates for the highest office in the US include Ramaswamy, Kennedy, and DeSantis. The discussions will bring Bitcoin at the forefront and force all candidates to position themselves on the issue.
Beyond
20. The integration of the Taproot upgrade of Bitcoin’s protocol in November 2021 allows for the implementation of smart contracts directly on Bitcoin’s blockchain. Taproot not only streamlines transaction efficiency but also unlocks the potential for complex contract-like functions to be executed directly on Bitcoin’s network, benefiting from its decentralization, security, and robustness. This advancement introduces a new realm of possibilities for decentralized finance (DeFi) and other applications. Such developments are starting to emerge in 2023 and could become a crucial milestone of the year 2024.
21. In the coming wave of Bitcoin adoption, it may become clear that Bitcoin is a lot more than just money. For instance, when US Major Jason Lowery released his best-selling book Softwar earlier this year, it raised awareness on the potential of Bitcoin well beyond the monetary and financial markets. Specifically, Bitcoin’s security can be leveraged not only for financial information, but also as a cyber-security protocol, which may become a strategic imperative for all countries’ national security. As Hal Finney was posting on December 5, 2010, “Bitcoin is a global, decentralized, yet consistent database,” inviting readers to consider the many applications for such a database. While this idea is still in its infancy, the seed has been sown and a remarkable vision is growing. Nobody knows the date of the harvest, but when it comes, it is expected to yield an era of unprecedented innovation and prosperity.
As the year 2023 draws to a close, the landscape for Bitcoin presents a confluence of promising developments, each contributing to a robust and optimistic outlook for the year ahead. From the anticipated influx of institutional investment to the transformative regulatory changes and the milestone of Bitcoin’s fourth halving, the stage is set for significant growth and wider adoption.
Furthermore, the evolving perception of Bitcoin as a secure, decentralized asset and its increasing recognition as an environmentally and socially responsible choice underscore its potential to transcend its current role in the financial landscape. The enthusiastic embrace by global leaders and the innovative advancements in technology only add to this narrative of progress and potential.
Each of these 21 reasons not only stands on its own merit but also interweaves with others to create a tapestry of interdependent factors that collectively fortify Bitcoin’s position in the global economy. The year 2024 promises to be a pivotal year in the history of Bitcoin – one that will solidify its place in the annals of economic history. The future is bright orange, and the time to pay attention is now.
This is a guest post by Thomas Jeegers. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.